Decline in strike action linked to slow wages growth

The failure of many Australian workers to get a real pay rise has been linked to a decline in industrial action, including strikes.

The findings follow the Fair Work Commission's decision last week to stop Sydney train workers from taking industrial action including restrictions on overtime and a one-day strike on Monday because it could damage the economy.

The analysis by the Australia Institute Centre for Future Work think tank shows there has been a 97 per cent decline in industrial action from the 1970s to the present decade. Across Australia, there were 106 industrial disputes in the first nine months last year, close to a postwar era low.

The new report found a correlation in the form of a "close statistical relationship" between a dramatic reduction in industrial activity and stagnation in wages.

The analysis shows there has been a one percentage point deceleration in wage increases for every decline in the frequency of work stoppages of about 60 lost work days per 1000 workers per year.

Report author and economist Jim Stanford said industrial action has become "almost extinct" in Australia and this had weakened the bargaining power of workers.

"It isn't a coincidence that we are seeing record low rates of industrial action and record low wage growth," he said. "Those are two sides of the same coin."

"The evidence is overwhelming that losing the effective ability to take collective action has been one of the key factors explaining the decline in wage growth which has now reached a record post-war low.

"If workers do not have the capacity to impose a cost of disagreement on employers in the form of some kind of collective action whether that is a work to rule, an overtime ban or an actual strike, then employers don't take bargaining as seriously."

While his research did not prove the direct cause of slow wages growth, Dr Stanford said there was a clear correlation in the form of a "very clear statistical relationship between the long running pattern of industrial action and the long run deceleration of wage growth".

"There is an old stereotype that unions are too powerful and cause too much disruption... but the situation today is the polar opposite," he said. "The data on how rare strikes have become I think affirms that unions have too little power, not too much."

Chief Executive Australian Industry Group Innes Willox said the level of industrial action in Australia fell significantly from 2006 when secret ballots for industrial action were introduced.

"Since 2006, the level of industrial action in Australia has been relatively stable," Mr Willox said. "Over the period since 2006, there have been times of high wages growth and low wages growth – neither of which have had any apparent link to the level of industrial action."

“More industrial action will be damaging to the economy. The last thing that the community needs is for the unions to be given even more power to take industrial action.”

James Pearson, chief executive officer of the Australian Chamber of Commerce and Industry said that while industrial disputes had plummeted since the late 1980s, slow wages growth was a comparatively recent trend.

"Wages growth is a function of more factors than workplace relations," he said. "Rising business competitiveness and confidence to invest, and consumer confidence, are likely to lead to more demand for labour and upward pressure on wages.

"The majority of Australians with a job are employed by small and medium sized businesses in the private sector. They understand sustainable pay rises can only come through sustainable profits."

But David Peetz, professor of Employment Relations at Griffith University said Dr Stanford's conclusions were plausible and broadly consistent with other research on long-term wage increases associated with the power of labour.

"To the extent that is shows that lower power of workers is associated with low wage increases and the low rate of wage increase at the moment is due to the low power of labour, then I'd say it is pretty accurate," he said.

ACTU secretary Sally McManus said the new research was further evidence that onerous industrial relations laws needed to change because it was too hard to take industrial action as a last resort.

"If employers don't give pay rises if you ask nicely, the only thing workers have left is to exercise their ability to withdraw their labour," she said. "If you take that away then they don't have bargaining power."

The Reserve Bank last year acknowledged slow wage growth may also reflect the erosion of workers' bargaining power to achieve higher wages.

Governor Philip Lowe has said that it is plausible that workers are less inclined to risk job security by seeking larger wage increases.